Small Apartment Investors

How to Analyze the Apartment Deals

If you are looking to invest in apartment buildings, then you should know how to analyze good deals in a short time and select the ones for further scrutiny that qualify for it. There are many sources for getting good deals and you have to spend your time and have the knack of knowing the good ones from the bad ones.

When you are analyzing the apartment buying deals, the key indicator to look for is the Cap Rate and its NOI amount. By applying the Cap rate multiplier to the NOI amount it is possible to determine the real value of the apartment building. Usually, the value of the apartment building is valued at 9 to 11 times its Net Operating Income and hence using this method you can easily find out the price range for the building.

Yet another way of analyzing an apartment deal is by using the cash flow metric or the cash on cash return and this gives the method to analyze the value of the property by calculating the Cash on cash return by cash flow after deducting all the expenses and dividing it by total cash invested. The real estate deals can be analyzed using the debt service coverage ratio also.

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